In the United States, tax credits allow taxpayers to subtract money from the amount of tax they owe.
Background edit
The amount of tax owed by an individual is determined by a tax formula that begins with the taxpayer's gross income, subtracts certain deductions from gross income to yield the taxpayer's adjusted gross income, then subtracts the greater of the standard deduction or itemized deductions as well as qualified business income deductions to yield the taxpayer's taxable income, then applies the appropriate tax rate to the taxpayer's taxable income to yield their gross income tax liability, and then finally subtracts tax credits from gross income tax liability to yield the amount of tax due:[1]
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List of important credits edit
Earned Income Tax Credit edit
Child care edit
Child tax credit edit
Child and dependent care edit
Adoption edit
Education edit
American opportunity tax credit edit
Lifetime learning edit
- ^ Whittenburg, Gerald E.; Gill, Steven (2019). Income Tax Fundamentals 2020. Cengage. pp. 1–6. ISBN 978-0357108239.